Wolseley profit rockets on US growth

Building and heating supplies group Wolseley announced £473m pretax profit for the year ending 31 July, leaping from £198m the year before. (Release)

The company's success has been, it said, driven by its US division, but weakness continues in Europe with the UK only showing the first signs of recovery.

Revenue of ongoing business activity was 4.1 per cent on the year before, with growth of 2.9 per cent.

Dividend per share for the year was up 10 per cent - 66p from 60p.

Ian Meakins, chief executive, commented on the positive outlook:

The highlight of these results was another strong performance across our US business where we achieved good revenue growth and the trading margin of 7.3 per cent was ahead of the previous peak achieved in 2007... Canada and the UK performed well in tough market conditions. We continued to face substantial headwinds in Europe and took decisive action to protect profitability with significant headcount reductions in the year.

Wolseley continues to be highly cash generative and we have adequate resources to fund future investment in the business alongside growth in ordinary dividends. We are today proposing a special dividend of £300 million accompanied by a share consolidation which reflects the Group's strong financial position and our desire to maintain an efficient and sustainable balance sheet.

With Wolseley near the top of the FTSE100 this morning, Michael van Dulken, head of research and accendo markerts, considers outlook for the company beyond headline figures:

While headlines all good, note significant change in cash/net debt position after payment of special dividend. [The figure for the year to 31 July was £411m net debt, whereas the year before was £45m net cash]. Could this affect things going forward? Consensus expecting great things in FY14. Can Wolseley deliver continued improvement, or could US recovery trip up and exposure prove too much? Shares in long term uptrend from 2009 lows, with rising support 5% below and all-time highs 6.7% above.